The advantages of bankruptcy
Bankruptcy is often viewed as a negative, even shameful thing, but the fact is that it carries advantages. It even leads to a rise in many credit scores.
Many people in Alabama have heard negative statements in relation to bankruptcy. That is, “Bankruptcy will wreck your credit score,” and, “You won’t be able to buy anything after bankruptcy,” are common refrains. Thus, it can be odd to hear “bankruptcy” paired with “advantages,” but the fact is that bankruptcy does come with quite a few benefits.
Credit scores often increase
Perhaps most interesting is the fact that many credit scores increase rather than decrease within a year after a bankruptcy. For one thing, a lot of debts get discharged, and they no longer hurt a credit score. For another thing, some people who file for bankruptcy already have subpar credit scores. There is nowhere for the scores to go but up after a filing.
Filers frequently get to keep their homes and cars
Another advantage is the ability of many filers to keep their homes and cars. A Chapter 13, for example, can help filers keep up on their mortgage payments without having to worry as much about unsecured debts such as credit cards.
People get the ability to learn from mistakes
Bankruptcy may be necessary for many reasons. Perhaps someone made many mistakes in college and racked up inordinate amounts of credit card debt. Bankruptcy is a chance for people to prove they have learned from their mistakes. They do not have to live for decades encumbered by errors they made while their brains were still forming.
That said, it is worth pointing out that many bankruptcy filers did many things right financially. All it takes is a single medical emergency or condition (being hit by a car or cancer, for example) to wreck years of careful budgeting.
The stress relief is immense
People in debt tend to get call after call from creditors. They may also be facing wage garnishments and lawsuits. Filing for bankruptcy suspends all of that, and the relief can be enormous. People can finally start to put their lives back together without the constant interference of external agents, many of whom use shady tactics.
Of course, bankruptcy may not make sense for everyone. For example, some people in dire financial straits may be able to negotiate their credit card debt down to manageable amounts or to use reputable debt consolidation agencies. Loan modification may also be possible, leading to lowered interest rates or an extended payment time window.
However, for those in Alabama who could benefit from bankruptcy, it comes with many advantages. The stress relief can be immediate when the seemingly endless calls from creditors stop, and within a year, credit scores might increase. An attorney can help determine if bankruptcy is a viable option or if something such as loan modification might be better.